SOFIA (Bulgaria), August 10 (SeeNews) - Standard&Poor's Ratings Services said on Friday it raised Bulgaria's short-term foreign and local currency sovereign credit ratings to 'A-2' from 'A-3', based on a methodology change made on May 15.
"The upgrade does not reflect an improvement in our view of the country's short-term creditworthiness," the agency said in a statement.
S&P also affirmed the BBB long-term foreign and local currency sovereign credit ratings on Bulgaria with stable outlook.
"The stable outlook reflects our view that Bulgaria's authorities will continue to maintain a favorable fiscal position on the back of ongoing budgetary consolidation and structural reforms, despite the likely slowdown in economic growth prospects and against its gross external debt position," the agency added.
S&P also said in the statement:
"According to our revised criteria, the short-term rating on a sovereign government is derived directly and solely from the long-term rating (for more details, see "Methodology: Short-Term/Long-Term Ratings Linkage Criteria For Corporate And Sovereign Issuers," published May 15, 2012). As a result, the upgrade does not reflect an improvement in our view of Bulgaria's short-term creditworthiness.
The ratings on Bulgaria reflect our view of the government's strong track record of appropriate fiscal policy and low gross and net general government debt, as well as the country's solid medium-term growth prospects despite the
expected slowdown in 2012-particularly if backed by improving absorption of EU funds and other benefits stemming from EU membership. Somewhat offsetting these strengths are Bulgaria's relatively low GDP per capita and still-large,
albeit correcting, stock of external imbalances and related risks, given the adverse economic backdrop.
The stable outlook reflects our view that Bulgaria's authorities will continue to maintain a favorable fiscal position on the back of ongoing budgetary consolidation and structural reforms, despite the likely slowdown in economic growth prospects and against its gross external debt position.
We could lower the ratings if the country's fiscal position weakens or its external liquidity position deteriorates significantly, possibly leading to a prolonged decline in income tax revenues or the crystallization of contingent liabilities on the government's balance sheet.
On the other hand, we could consider raising the ratings if the government fully implements its structural reform agenda while consolidating the budgetary position further, external conditions for the financial system ease, and exports continue to lead economic growth toward a more balanced structure-while eroding the external debt burden further-leading to higher potential growth."